Forex Technical Analysis EUR/USD 2014-07-22

Good afternoon, dear traders. Today one of the key events of this afternoon is the release of the monthly Core CPI, published by the U.S. Bureau of Labor Statistics. The indicator shows the change in prices of goods and services with the exception of the most volatile components: food products and electricity. The indicator measures the inflation rate, which in its turn affects the credit policy and general interest rates in the United States. Members of the Federal Open Market Committee (FOMC) consider inflation expectations for limiting its excessive growth rate by tightening the regulation. An increase in base rates leads to the investment inflows into the economy: for this reason the CPI publication may result in a significant boost of the American currency against the most liquid competitors, e.g. Euro.

Here we consider the EUR/USD behavior on the daily chart. The price is located within the consolidation area limited by the triangle. It should be mentioned that the top side of the triangle is more significant, as it is formed by the monthly downtrend line, unlike the weekly support. Thereby, the consolidation has a higher expectation to continue the bearish sentiment. The daily trend channel and the ParabolicSAR value confirm the direction. Additional movement acceleration into the red zone can be produced after the fractal resistance intersection at 1.34815, which is confirmed by the DonchianChannel 30-day support. This mark can be used to open a pending sell order with risk limitation at 1.37060. Stop Loss can be placed at this level, since it is confirmed by ParabolicSAR and DonchianChannel historical values.
Please note that at the moment a bullish divergence of RSI-Bars(13) is observed. Before opening a short position, make sure there is the oscillator resistance breach at 32.01105.

After position opening, Trailing Stop is to be moved after the ParabolicSAR values, or near the next fractal peak. Thus, we are changing the probable profit/loss ratio to the breakeven point.